22 July 2010

with regards to candidate David Hedrick's...

Occasionally I digress from the mundane doings of my own life to share my thoughts on politics here. I have done so for big elections, why not the smaller but still significant races here at home? Some friends from my hometown are rallying behind the young conservative David William Hedrick from Southwest Washington and I feel it appropriate to share my assessment of what he has said in the press here, rather than in short Facebook comments that could easily be misunderstood. For background, please read the article from the Columbianwhere Hedrick was posed presumably the same six questions asked of his opponents in the race for the 3rd Congressional District of the state of Washington (includes Clark, Cowlitz, Lewis, Pacific, Skamania, Thurston, and Wahkiakum Counties).

In regards to the first question concerning economic recovery, I believe him correct in his assessment that government does not create private sector jobs but believe he dodged the spirit of the question. Politicians of both parties including George H. W. Bush and Bill Clinton (and the congressional houses that straddled those years) are responsible for NAFTA and later CAFTA, which is also indirectly responsible for the mass exodus of manufacturing jobs south of our border. He later rhapsodizes about border security, but I wonder if he understands how we dropped the ball in opening up our borders to allow our own corporations to operate their front offices on Wall Street, production in Mexico or Panama, and supply chains from China and abroad without facing any financial penalties for such business practices. We used to tax imports heavily which encouraged companies to produce at home as much as was reasonable and provide us with private sector stability, but now we financially encourage most of what you and I consume to be made anywhere but here.

Sure the government itself does not create jobs, but policies have the power to stimulate new markets, manage supply chains and production, reign in unethical business practices and schemes designed to defraud consumers, and set product safety standards to keep our families safe. Let's not forget that our economic floundering is a direct result of government inaction while our manufacturing sector exported jobs and our financial services sector built a house of cards (read derivatives) full of ill-conceived mortgage backed securities that in reality had little or no value except the value they claimed and then attempted to guarantee with AAA ratings. Then when it all fell down they asked our government to bail them out while insisting their bonuses were guaranteed--not tied to performance or competence!

The second question is about the Columbia River Crossing. The background here is that I attended a meeting next to the Hayden Island Zupans (now out of business incidentally) in a Yacht Club where a Portland City Council member and a Washington DOT representative hosted a Q&A about multiple proposals that would go forward to citizen groups on both sides of the border for feedback. This meeting was in September 2006, four years ago. At the meeting I learned to my surprise that the Crossing project was fairly far along already. There were 3 major plans on the table: another larger bridge with light-rail service to downtown Vancouver from Portland, a tunnel (also featuring light-rail), a bridge that bypassed Hayden Island which would then be accessed from smaller bridges to Portland (decreasing congestion caused by Washingtonians getting on and off the freeway to take advantage of tax-free shopping at the first exit they saw on the Oregon side).

Virtually all proposals raised the height of the bridge deck to that of the 205 bridge and moved access points on either side further from the Columbia itself by necessity to accommodate the height. The question being raised to the citizens of Hayden Island was whether or not they wanted to keep their direct link to the interstate artery or opt for a smaller connection via the Oregon side and try to discourage the island from becoming a truck-stop/shopping district as it had recently become. Most of the attendees liked the idea of less island traffic, but didn't really want to have to drive further to find their way north or south. Everybody wants to have it both ways apparently. The other item on the table was Wal-Mart. Yes, Wal-Mart wanted to move onto the island that had already seen it's charm diminished by easy-to-access tax-free shopping right across the bridge from downtown Vancouver. Basically most of the attendees of the meeting wanted to protest Wal-Mart (as well as myself and my financial services industry colleagues who brought me there). Our interest was to keep a tax-free Wal-Mart just a little further down the road and a little further out of reach for our neighbors on the Washington side.

I think we were trying to keep Vancouver from suffering from more retail exodus which was already holding property values back in the first place. Basically the representative also on the Portland Development Commission informed us that while the PDC was not a fan of big-box retail, they had no specific authority to tell property owners they could not build or sell to Wal-Mart or others like them, but that they could zone the island in a manner that would limit the size of any potential retailers like Wal-Mart by the traffic capacity limits the island already was suffering from exceeding. That was the connection to the Columbia Crossing project. Limit the access to the island and discourage big-box retailers from making the island their home too by making the next exit or two more desirable than theirs.

Hedrick's assessment of the Crossing project is an oversimplified one concerned more with who pays exactly how much than what the people of his district in Clark County need and want. I lived in Vancouver in 2005-2006 and tried to make a go of it in the mortgage brokerage business and from my experience Clark County is a simple sleepy bedroom community of bridge commuters who mostly work in Portland and very nearly truly live in Clark County. Vancouver does have a port and it's downtown is almost a shadow of what Bellevue, Tacoma or even Everett are to Seattle, but the dissonance between the tax structures on either side of the bridges limits what Vancouver is and what it can become.

Vancouver has no income tax, but it does have a sales tax. Some businesses that do not produce anything cleverly set up shop on the Washington side where their employees can earn slightly more than if they crossed the bridge for a paycheck, but production stays on the Portland side where their wares are not taxed if sold in state. Look for a vibrant retail sector in Vancouver and you will find only struggling businesses that are at the mercy of their neighbors willingness to opt for convenience rather than tax savings across the bridge. The general rule of thumb is for small purchases it is acceptable to stay close to home, but for major ones cross the bridge and buy in Portland instead because the tax savings is real and significant. Car dealerships get a break because Washington requires the tax be paid on any car purchase to license the car in Washington and because neighbors WILL rat out each other if they catch you with Oregon plates. The fines are heavy.

Basically Hedrick seems to focus on something I find odd, light-rail. He presupposes that Vancouver does not want it. I can tell you they very much DO want light rail if it connects to the system Portland has already built, but without the crossing it cannot connect. Portland has already built the system up to Hayden Island and paid for it completely without Clark County taxes (unless you count the payroll tax of employees who chose to live in Washington even though their jobs remain in Oregon). Once the minor detail of a new Columbia Crossing is dealt with, Vancouver can set up it's own light-rail system which they have already planned for incidentally and run it North and East of downtown Vancouver, even likely reconnecting across the 205 bridge which could easily manage a lane reserved for light-rail which would connect near the airport.

The details of whether to merge the Clark County light-rail system with Tri-Met's system has not been agreed on and currently Clark County has it's own bus system which runs across the river to interconnect with Tri-Met bus routes, but the two systems could merge if the governments would only agree on how much each would contribute to the collective kiddy since the system would inevitably receive some tax-payer funded subsidy (realizing that conservatives hate this of course, but I believe governments must divert taxes to help fund things that are good for us even if we wouldn't take the pill otherwise).

In a nutshell, build it now and pay a reasonable amount from Washington state taxes, though that won't be his role if elected to Congress anyway.

Regarding energy policy he seems to favor fossil fuels like any other conservative over innovation and renewable energy sources. I don't think progressives who want our government to push us (yes using tax money to motivate private-sector willingness to invest in new energy technologies) towards responsible and sustainable energy truly believe this conversion will happen overnight, but we simply believe it must be done because we cannot afford to delay any longer. Our needs will continue to expand and the availability of dirty-fuel will naturally diminish over time. We may never completely cut the cord with oil and gas, but we have to shift towards wind and solar as much as possible, even if it never sustains all our energy needs.

I am currently reading Pugetopolis, written by another Northwest native who calls himself a "mossback" which might as well read "conservative" (though his ideology likely differs from Hedrick in many ways) at least in the sense that he wants to limit population growth in this beautiful land we call Puget Sound to preserve its beauty and protect our ability to continue thriving here unharmed by the consequences of our love for the land. I have yet to see how the mossback proposes we achieve limits on population growth without implementing things progressives and conversation alike distaste such as government mandates, regulations, growth boundaries, density limits, environmental regulations that effectively shut down most industry and drive jobs completely away, or perhaps forced sterilization or secretly engineered periodic plagues.

I think growth is inevitable and we will have to manage both density in our urban centers and outward expansion. We will have to say "this is as far as we will go" and "this is as dense as we will allow certain cities to become" and once we reach those limits we will have to consider telling people "please stop moving to Puget Sound, have you considered Montana or British Columbia? I hear the Canadians are very nice."

To the next question, I agree that the bailouts were wrong and I said so when Bush was still in office and both he and Congress tried to tell us we had to do it even if it was a bitter pill to swallow because our entire financial system would fall apart if we didn't. I disagree with Hedricks assertion that government created the crisis in the first place through excessive regulation. Unless you believe Bush was a regulator, government was not excessively monitoring or regulating our financial markets. Again, I tried to work in the mortgage business in 2006 and the only regulation we operated under was driven by the banks themselves which haven't seen major new regulations since the FDIC was established in the wake of the last depression. Basically all I needed to work as a loan officer in the state of Washington was a $200 course given by any of a dozen online companies sponsored by the banking industry to learn how the mortgages themselves worked, how to evaluated credit worthiness and how to sell the products.

The state of Washington got into the game by requiring loan officers be licensed later that year and discovered that half of those at work in the mortgage business now applying for licensing were formerly convicted felons. Well I don't have a statistic source for this, just heresy in the business as I was leaving to find something I could really make money at (2006 was the height of the bubble here in our state if you remember, it all came crashing down in 2007-2008 when the defaults were pouring in thanks in part to increased private sector job losses). Basically what I witnessed was that there was no system requiring loan documentation. No-doc loans were given out to those with high credit scores while the systems used to generate those credit scores were kept secret by the private companies who collected that information (for profit) and sold it to the private financial services companies needing some way to evaluate consumers ability and likeliness to repay. I watched while those with high scores took advantage of the system to get multiple loans simultaneously, shuffling assets around and hedging their bets that the loans would fund before any knowledge of the other loans being taken out could circulate back to the other banks considering funding loans for the individual.

For example, someone working in real estate without stable income (but with a few years--or even months--of good sales) could dupe a bank into believing he was good for a $500K loan. A shrewd person could convince 3 banks at once for three different properties. It was all about timing. These people were betting on one thing, property values will continue to rise. They knew the properties could not rent for the actual amount due each month, they would just take a modest loss each month and when the properties were a couple years old, claim they lived in them and avoid capitol gains taxes when they sold them for 20% markup. The more valuable the property the more potential for profits.

The problem is that while they were doing this others were being told to falsely claim they made $6k/mo while they really only made $3k/mo. Why? There was nothing on the market for the person making $3k/mo unless they had a huge down payment and the real estate agent and loan officer couldn't make money if the property can't sell. Everyone at the time knew the market was inflated above what average middle-class borrowers could afford and everyone was looking for an angle. I simply refused to participate in fraud, so I didn't make any money during this time and had to go back to work in healthcare instead.

Of course if you were clearly committing fraud you could go to jail for doing so. The problem was the only way the bad loan comes up on anyone's radar is if the person defaults. If a particular loan defaults the file could be requested by the bank servicing the loan. If the bank found discrepancies between what the borrower reported to them and what was in the file, they could investigate the loan officer and/or broker, but all they could really do is file a suit against the brokerage to recover losses or transfer the loan to the brokerage. If this happened to a particular financial company it could drive them out of business, but they could simply wiggle their LLC into bankruptcy and start over in another town or down the road with a new mortgage company name.

The banks masked the problem by bundling up loans and selling them to wall street. Wall street broke them up and bundled good loans with bad ones to make the whole lot of products more appealing to investors. Then came the derivatives; securities backed by securities backed by securities backed by actual real property that had actual (inflated) value on the market. I sat in once while a salesman pitched us the idea of paper notes that claimed a person had equity in a property (based on an appraisal that would no-doubt seek out the highest "comparibles" to establish the greatest amount of equity) in excess of other liens on said property which would then be held in trust in the persons name as an investment which a bank would then loan money against to other banks in the overnight market of banks borrowing from banks to remain solvent during business hours. Basically fake money used to create funds which would be loaned at a high rate of interest overnight and repaid in the morning so everyone's books balanced the next day. The interest (minus a "small administrative fee") would be paid to your trust account which would in turn increase the amount the trustee could lend the following night on your behalf turning your $50K worth of equity in your home into another $50K in cash assets in a matter of a few months presumably.

The point here is that the market creates all kinds of wild schemes. The government in this scenario is not the problem unless it is overtly allowing such behavior to consume everyone with visions of easy money without sweat, blood or toil. The proper role of government in these matters is to monitor the financial markets for actions that place citizens' investments at risk. We blindly trust Wall Street to work FOR us when in reality they use our money to work for themselves. I saw this first hand in the mortgage business as real estate and financial services professionals used clients to line their pockets as fast as they could so they could build their own portfolio of property holdings. They circulate lists of "notice of defaults" and foreclosures among their guilded community of back-scratchers so they can collectively pounce on the supposedly undervalued properties before the average person has a chance to stumble on a good deal--in part because stories of below-market-value homes on-the-market would deflate values which is the one thing nobody in the business wants to see happen--that is until it happens anyway and they realize they can even make money off that!

Regarding the question about immigration. Well I could go on about that as easily as I have everything else. Basically I understand where he and the rest of the Border-Security advocate's are coming from. I can see everything they can see just as easily. The litmus test I have for him and others like him is how far would you go? Which border are we talking about securing here anyway? Which peoples are we trying to prevent from entering this country illegally? Would he be surprised to know the only person I know for a fact is an illegal immigrant (because he told me as much) is actually from Europe? He isn't taking any job you or I would otherwise have either, unless you are someone who is willing to do day labor for friends at half whatever the market supports for similar work when performed on-the-level. Basically the only work my friend can find is construction work from people who are essentially do-it-yourself remodelers needing an extra hand but unwilling to hire unknown day-laborers from the temp-worker companies that do actual background checks and handle paying taxes, etc on behalf of the client and the worker.

My friend reports that while the community of his nation of origin here in the Northwest seems friendly toward people in his situation, they are in fact quick to take advantage of their native countrymen and offer them no real help establishing themselves here. His story? Well, he came here chasing a girl who strung him along and eventually cut him loose without enough money to get himself back home and no legal status here to find legitimate work for which he is qualified for and skilled at.

My question here is whether or not he is even sincere in his convictions about illegal immigrants. Our entire economy feeds on the existence of a cheap labor source that doesn't ask for more than a small amount of cash money--no benefits, no social security, no taxes paid on their behalf. I ask if Hedrick is willing to use our federal government to go after the people who are willing to exploit illegal immigrants and create the demand that keeps them crossing all our borders in high numbers throughout our countries history. He seems quick to call the immigrants themselves criminals simply in the act of crossing an imaginary line, but does he also consider those who exploit them criminal in seeking to evade our tax laws in pursuit of cheap labor? People so easily tainted by their desire to earn an advantage afforded them by having the means to participate in a post-slavery form of enslavement?

On the last question regarding the Iraq/Afghanistan wars, I essentially agree. President Obama did not create either war, but inherited a problem he seems uncomfortable administering with conviction and conscience. I am in favor of complete withdrawal but we must realize each circumstance is unique and requires a nuanced approach. In Iraq, I believe the people are ready to take leadership and our withdrawal might create temporary instability, but the situation that created the conflict in the beginning is long over. We can and should leave the peace-keeping efforts there to a combination of coalition forces and their own citizen based police and armed forces. We must limit our involvement in Iraq as soon as possible.

With Afghanistan I believe our involvement there must continue longer, potentially indefinitely. We essentially created a problem a long time ago there by half-heartedly supporting their fight against the Russians, destroying their infrastructure and economy in a far more serious way than we have in Iraq. They were never able to completely recover and the rise of the Taliban there is testament to that. Immediate withdrawal there will only result in the Taliban's return. The people there need a chance to rebuild their own government and wean themselves from the fear they have suffered under so long. This might even require a troop surge there. We also must eventually find Al Queda there and put the men who really did plan those attacks on us 9 years ago on trial for their crimes. Removing the head of that organization will go a long way in easing the fears of the the peoples of Afghanistan allowing them to once again resist fundamentalist religious control of their population. Without Bin Laden incarcerated and the Taliban's supply chain permanently dismantled they will always fear the Taliban too much to lead in their stead.

While there is no political gain for any candidate to say so, I believe we owe it to the people of Afghanistan to rebuild their country after 30 years of war which we have essentially always been partially responsible for.

I have not familiarized myself with anyone else running in the 3rd district. I feel it is time to find out about my own next, but I will certainly post on anyone else in the 3rd district to offer some contrast if and when I learn of them.